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Investing Blog Roundup: Risk Premiums

A few readers asked about the term “risk premium” in Wednesday’s article. In short, the term refers to the fact that whenever one category of investments carries greater risk than another category of investments, that risk should be rewarded in the form of higher expected returns (which may or may not show up over any given period).

For example, corporate bonds have greater credit risk than Treasury bonds. So corporate bonds of a given maturity will usually have higher yields and earn higher returns than Treasury bonds of the same maturity.

As it just so happens, the anonymous blogger at Monevator published an article this week discussing several such risk premiums:

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